New adjudication system to broker construction lien disputes

A new mandatory adjudication system for construction disputes in Ontario should improve the efficiency of the construction industry, Toronto litigator Jessica Vickerman tells AdvocateDaily.com.

The interim dispute resolution process is a key plank of Bill 142, the Construction Lien Amendment Act, passed by the provincial legislature on Dec. 5 and designed to bring a “prompt payment” regime to Ontario.

Vickerman, an associate with the Toronto office of Shibley Righton LLP, says the amendments represent the first major revision to Ontario construction lien law since 1983.

“The impetus behind these changes is to keep the money flowing through the industry — from owners to contractors to subcontractors — and to speed up payment times,” she says.

”The mandatory adjudication system supports that aim by creating a way to quickly and inexpensively resolve disputes over money.”

The procedure kicks in when one party raises a contractual issue related to the value of services or materials, payment, and set-off and release of holdback, among others.

Cases will be heard by adjudicators registered with a body designated by the provincial government, known as the Authorized Nominating Authority (ANA). The new law envisions a 30-day turnaround for written reasons by decision-makers after receiving documents from the party initiating the hearing.

In a statement announcing the passage of the new law, Ontario Attorney General Yasir Naqvi hailed it as “the biggest change to our construction laws in over 34 years.” Provincial estimates suggested late payment had grown as a problem in all sectors of the construction industry and, between 2002 and 2013, the average collection period increased from 57 to 71 days.

“These changes will have a real impact on people’s lives, giving workers assurance they will be paid on time and in full, and help to ensure disputes are resolved quickly,” Naqvi added.

Vickerman says Ontario has arrived relatively late to the prompt-payment party, which has its roots in the U.S. that were initiated more than 20 years ago.

“From there, it spread to other jurisdictions, including the U.K., and now it's arriving in Ontario,” she says. “There has been a lobbying effort from players in the construction industry for a number of years to get amendments passed.”

But the sector will have to wait a little longer to see the mandatory adjudication provisions in action, since the amendments will only come into effect in October 2019. In the meantime, the provincial government will be busy putting together regulations under the new law and establishing the ANA to oversee the new mandatory adjudication process.

“There are still some issues to be worked out,” Vickerman says.

She says she’ll be interested to see whether the adjudication system actually cuts the amount of payment litigation. Although adjudicators’ payment orders must be satisfied within 10 days and may not be appealed, the law makes it clear that they are only interim and not binding on any arbitrator or court subsequently ruling on the same subject matter.

“The idea is to get a quick determination. It’s not clear whether parties will live with the initial adjudication,” she says. “That would certainly affect the number of court actions, but it’s unknown how it will play out.”